Australia: Non-commercial uses and the Retail Leases Act 2003 (Vic)

A recent decision of the Victorian Supreme Court of Appeal
serves as an important reminder of the broad application of the
Retail Leases Act 2003 (Vic) (RLA).

In IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty
Ltd [2017] VSCA, the Victorian Supreme Court of Appeal upheld
an earlier decision of the Victorian Supreme Court, finding that
premises used for a cold and cool storage business fell within the
definition of 'retail premises' for the purposes of the
RLA. The case turned on whether the premises were used for the
'retail provision of services'.

Background

In 2012, CB Storage Pty Ltd (the Tenant)
entered into a lease with IMCC Group (Australia) Pty Ltd (the
Landlord) for a lease of a property in Laverton
(the Lease). The permitted use defined in the
Lease was 'Cold and cool storage warehouse and transport
facility'.

In accordance with the provisions of the Lease, the Tenant made
payment of outgoings to the Landlord including land tax. Notably,
under section 50 of the RLA, a provision of a retail lease is void
to the extent that it makes the tenant liable to pay an amount for
tax for which the landlord is liable under the Land Tax
2005 (Vic). The Tenant initiated proceedings seeking to
recover the land tax and other payments it had paid to the Landlord
that are prohibited under the RLA.

At first instance, the Victorian Civil and Administrative
Tribunal (VCAT) found that the premises were not
retail premises for the purposes of the RLA. VCAT came to this
conclusion on the basis that the ultimate consumer of the goods or
services must use the goods or services to satisfy their own
personal needs. Whereas the Tenant's customers used the goods
and service for a business or other purpose.

On appeal, the Victorian Supreme Court overturned VCAT's
decision by adopting a broader approach, ruling that a consumer
could be a person who uses the goods or services for business
purposes or other purposes other than for personal needs, provided
that the consumer in question was the "ultimate consumer"
of the goods or services.

The Landlord appealed that decision to the Victorian Supreme
Court of Appeal. The key issue in dispute was the application of
the 'ultimate consumer test' in relation to the provision
of retail services, specifically whether business-to-business
transactions could satisfy this test for the purposes of the
RLA.

The Victorian Supreme Court of Appeals
decision

The Victorian Supreme Court of Appeal held that a detailed
analysis of the goods or services being provided is required when
considering whether premises are used for the retail provision of
services and whether business-to-business transactions could
satisfy the 'ultimate consumer test'. In particular, the
Court held that the following are all relevant considerations to be
taken into account when determining the 'ultimate consumer
test':

the nature of the service that is offered

whether it is a service that is generally available to anyone
who is willing to pay a fee

whether the purchasers of the service are, as a matter of fact,
the end consumer or are the services passed on by the purchaser in
an unaltered state to some third person.

In applying the above considerations to the matter in dispute,
the Court of Appeal supported the view that the Tenant was
providing retail services from the cold storage facility given:

the Tenant's customers (who were mainly companies involved
in the food industry) paid a fee to use the Tenant's
services

any person (including members of the public) could purchase the
Tenant's services if the fee was paid

the Tenant's customers were the ultimate consumers of the
Tenant's services as they did not pass on the services to any
third party

the Tenant's business operated during normal business
hours.

Accordingly, the RLA applies to the Lease as the Tenant is
providing retail services.

Key takeaways:

The key takeaways from this case include:

Victorian Courts favour a broad application when determining
whether the provision of services from leased premises falls within
the definition of 'retail services' for the purposes of the
RLA'.

Retail premises are not limited to premises from which a tenant
supplies goods or services to 'non-commercial users'. As a
result, many warehouse and logistic businesses may be considered
'retail premises' for the purposes of the RLA. That said,
it must be noted that there are other exemptions to the RLA –
such as the monetary exemption (where a tenant's monetary
obligations exceed $1 million in the first year) that are likely to
exclude the RLA from many such leases).

Careful analysis must be taken prior to entering into a lease
as to whether the RLA applies to the tenancy. Landlords should
review their existing lease agreements to avoid an existing tenant
attempting to claw back certain payments (such as land tax payments
or repair and maintenance payments).

Tenants should consider whether there is scope for their leased
premises being considered retail premises given the protection and
benefits the application of the RLA provides.

This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
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